If an Increase in National Income Has a Negative Effect

question 21

Multiple Choice

If an increase in national income has a negative effect on the trade balance, we should expect that

• A)domestic interest rates will rise, attracting foreign funds
• B)domestic interest rates will fall, causing an outflow of funds
• C)domestic assets will become more expensive
• D)the central bank will expand money supply
• E)the central bank will buy foreign currency thus increasing its reserves

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